Anyone Else Only Buying Dividend Stocks?

[Retired To Win]

For 20 years or more, I invested pretty much the same way most other people do. I put my retirement savings into a basket of mutual funds and hoped the value of that basket would grow. But every price downturn would shake my confidence in that hope of growth. I would look at the drop in market value of a fund -- or of my entire portfolio -- and fret, worry, stress. And if the price drop was deep enough or continuous enough I would finally freak out and sell the position at a loss.

Why? Because my perception of the value of my mutual fund shares was solely based on their market price. Because I saw my retirement future as tied to and dependent on the market price of those shares. Because I did not want to lose any more of that retirement future to stock market drops.

Boy, that really did not work for me. My fear of loss was too powerful a force. Fighting it involved daily stress, doubt and anxiety. And each time I gave into it by selling "to stop the loss" I would be hit with feelings of failure. And if the share prices recovered some time after I had sold, I would add to that feeling additional feelings of guilt, recrimination... and more failure. I felt completely out of control of my retirement future.

Thank heavens I've found a different way of investing that has really worked for me. A way that has put me much more in control. That way is to only invest in carefully screened individual high-yielding dividend stocks.

This investing mindset works for me. But I am not a financial advisor and I am not saying this will work for you. So, what does work for you? What lets you sleep at night?

[BuckyBadger]

Nope.

[krantcents]

My investing philosophy (over 40 years) is growth! I invested in income property for growth and walked away with a big enough nest egg to become financially independent at 38 years old. I since invested my money in the stock market in a diversified portfolio of mutual funds and stocks. Investing is a personal choice although a decent return is important. Dividend stock provide a steady return, but the price appreciation is lower than other choices. I see dividend stocks as a defensive move when you are close to retirement or instead of bonds.

[WealthInsights4U]

Agree with your thought of having exposure in high yielding dividend stocks. Infact this is a defensive strategy among the growth investments.

My thought is, continue with the same approach, at the same time also keep in mind that Diversification/ Asset Allocation is also an apt way of investing. Try to spread your Investments across 3 or 4 assets class which meets your risk profile/ return objective.

When you invest in mutual fund, choose the right set of fund ( their objective/risk class/time frame). Try to match that with your objective. You cannot time a mutual fund with existing at highest return or selling without capital loss.

You need to give a time frame for the mutual fund ( which meets your risk profile) and stay invested. When the expected return is achieved, you can exit. Infact, the fund may move up even after you exit. But you need not worry. You should be happy that if the investments meet the objective when you initially had invested. Thats it.

Also do spread money across Asset class. Savings Account ( for emergency)/ Bonds/ Growth Mutual Fund/ High dividend yielding stocks/ commodity Etfs.

All the above should be in line with your Investment objective. Investment objective will be platform on which you deploy money over period of time. If your investment objective is conservative- capital safety/regular income, then the asset allocation mix changes.

Rgds

[cardtrick]

Nope. I'd much rather buy a company that has figured out how to re-invest profits effectively instead of paying dividends. I buy whatever is on sale. Not much in the current market but if you look hard enough, you can find something.

[scfr]

So, what does work for you? What lets you sleep at night?[/i]

No debt, cash, Treasuries, low-cost broad-market index funds, low percentage of net worth in non-financial assets, and being female: http://www.usatoday.com/story/money/...n-men/6176601/

[Retired To Win]

Nope. I'd much rather buy a company that has figured out how to re-invest profits effectively instead of paying dividends. I buy whatever is on sale. Not much in the current market but if you look hard enough, you can find something.

I want the company to share its profits with me. And that is where the dividend comes in.

When I buy a block of a dividend-paying stock, in my mind what I am focused on is the dividend. I am buying the future income stream that will be provided by that dividend. I am not projecting or counting on an increase in the stock's market price (although I certainly will cash in on it if it happens).

How can anyone count on a company's stock price appreciating?

[Tabs]

I think it depends on what it is you are looking at and what you, the investor, is also looking for.

With most stocks, my one over-arching question is, "Where is the growth potential?" Because, without growth, not only will you not see any paper gains, but you are also more at risk for paper losses.

However, I have also purchased dividend stocks in the past as a defensive strategy to counter-balance my riskier stock picks. And once again, it really depends on what you are looking at. For example, with Waste Management (WM), well, there's really not a whole lot to say about it. Even with the likes of Coca-Cola (KO) or Proctor Gamble (PG), it's typically seen as stable stocks used for dividend purposes.

So, to me, it just depends.

Right now though, I have more important things I want to focus on than stock picking, so I've decided to go all-passive with index mutual funds and ETFs. May or may not come back to it some day. Time will tell.

[JulieAlbright]

I've become interested in dividend stock the past couple of years. I've bought a few, ATT and Lockheed Martin are my favorites of what I own. But that is really just my small brokerage account that I kind of dabble with. Our Retirement Funds are nearly all Mutual Funds in the 401k and ETFs in the IRAs. I do see the value in Dividend Stocks if you can find the jewels - Low tax rates on the dividends and stable underlying asset value on the shares.

My main problem with these stocks was when I ran the Stock Screener tools I kept setting up, they kept returning Tobacco Companies, which I won't buy. I realize it is probably a silly objection because the Mutual Funds and ETFs I own probably are already buying them, but that's just kind of my decision.

When we actually do retire, I imagine we'll transfer all our 401ks to self-managed IRAs and I'll likely choose low cost Index Funds for most of the investments. Even still, if I wanted to build up the dividend payments, I'd probably go with a Dividend focused ETF for the best diversification rather than just try to pick Individual stocks myself. I enjoy playing a little in the stock market on my own but I'd never feel comfortable betting the whole farm on my abilities.

[cardtrick]

I want the company to share its profits with me. And that is where the dividend comes in.

When I buy a block of a dividend-paying stock, in my mind what I am focused on is the dividend. I am buying the future income stream that will be provided by that dividend. I am not projecting or counting on an increase in the stock's market price (although I certainly will cash in on it if it happens).

How can anyone count on a company's stock price appreciating?

Dividends are only one way of doing that. Berkshire Hathaway has never paid a dividend. A lot of other great companies buy their stock back instead. Dividend investing has been hot right now because of the low rate environment. Historically, dividend stocks underperform when interest rates are high.

[snafu]

I find the USA economy scary just now. I bought more units in a USA Div MF on the recent dip. I'm counting on interest rates staying low for the next 8 - 12 months when I'll re-assess.

[JBinKC]

Dividends usually comprise half of the return in a buy and hold forever portfolio.

I do not necessarily seek dividends but do seek potential stock candidates that should be paying them. I have successfully lobbied a few cash rich value microcap stocks operating in riskier jurisdictions to pay them at relatively high rates of return to unlock share value and it has been a successful venture.

[Retired To Win]

... Dividend stocks provide a steady return, but the price appreciation is lower than other choices. I see dividend stocks as a defensive move when you are close to retirement or instead of bonds.

As I stated above, price appreciation for me is welcome but optional.

I have built my stock portfolio to provide me income based on my stock dividends. I have NOT built my portfolio on the expectation of following the standard withdrawal strategy of cashing out positions and spending down the portfolio's principal. Some day in the future I may very well adopt a cashing-out plan. But that will be done either as an end-game or in response to IRS required distribution requirements. I will not be cashing out positions just to cover my living expenses.

Are you -- or are you planning to -- cash out your positions just to cover living expenses?

[feh]

No, I don't buy individual stocks or stock funds for their dividends.

OP - you simply had an asset allocation that was too high in equities. AA needs to be set to prevent emotions from causing one to sell low.

Folks might find this thread interesting on the dividends vs cap gains topic:

http://www.bogleheads.org/forum/viewtopic.php?f=10&t=144019

PS - mathematically, it makes more sense to sell shares than receive dividends, as long as the tax rate for cap gains remains below your income tax rate

[cardtrick]

To elaborate a bit more,

Stock buybacks raise the price of the stock because the number of shares outstanding drops. When dividends are paid, stock prices drop because yesterday the value of the company was higher than it is today (ex-dividend date) as it has paid out $X in dividends.

If a company's return on assets is 10% (a lot of companies are able to achieve this), and they feel that any new capital can be deployed at the same ROA, then they should absolutely not pay out dividends.